And Then There Were Three

I have been saying for some time that the future of EDA  lies in consolidation of the players from the current four-horse race to a two-horse one. Finally, last month, Synopsys showed that they understood this requirement with the announcement of their acquisition of Magma, a company I expected would have been acquired some time ago.

Synopsys’s Financials
Synopsys’s (Nasdaq:SNPS) Q4 revenues grew 4% over the year to $390.5 million and EPS of $0.45. The market was looking for revenues of $390.1 million and EPS of $0.45. By segment, License revenues grew from $343.8 million last year to $331.5 million. Maintenance and Service revenues grew to $46.7 million.

They ended the year with revenues increasing 11% over the year to $1.54 billion with EPS of $1.80.

For the current quarter, they project revenues of $412 million-$420 million with EPS of $0.51-$0.53. Synopsys projected the year’s revenues at $1.64 billion-$1.67 billion with EPS of $1.93-$1.99. Analysts were expecting the current quarter’s revenues to be $390.9 million with earnings of $0.47 per share and annual revenues of $1.65 billion with earnings of $1.99 per share.

Synopsys’s Acquisitions
Synopsys announced the acquisition of Magma last quarter. It purchased the other EDA leader at a price of $7.35 per share, amounting to $507 million.

In addition, Synopsys acquired other smaller players, including Extreme DA and nSys Design Systems. Privately owned Extreme DA developed tools and technologies to improve performance, power consumption, and yields for their customers. Synopsys is looking to use Extreme DA’s technology and engineering talent to extend their expertise in static timing analysis and multicore software development.

They also acquired India-based nSys Design Systems, a provider of verification IP technology, which will help them address growing verification challenges faced by designers to create complex systems on chips (SoCs).

Synopsys’ stock is trading at $27.04 with a market capitalization of $3.9 billion. It touched a 52-week high of $29.35 in February 2011.

Cadence’s Financials
Meanwhile the other significant player, Cadence (Nasdaq:CDNS), reported Q4 revenues of $249 million compared with previous year’s revenues of $220 million. Loss of $0.08 per share was significantly higher than previous year’s EPS of $0.01. For the year, they reported revenues of $936 million compared with previous year’s $853 million. EPS of $0.07 was a penny higher than the previous year’s earnings of $0.06 per share.

For the current quarter, they expect revenues of $255 million-$265 million with loss expected to range from breakeven to $0.02 per share. For the full year, they expect revenues of $1.03 billion-$1.07 billion, with EPS of $0.00-$0.10.

Cadence’s Acquisitions
Cadence did make a small acquisition last year when they bought out Azuro Inc., a provider of digital implementation and optimization tools for next-generation SoCs. Azuro’s offerings include a unique clock concurrent optimization technology that helps deliver capabilities to increase performance and power. Earlier this year, they also acquired Altos Design Automation, a provider of solutions that enable foundation IP development for the delivery of complex SoCs at advanced nodes. Through the acquisition, Cadence will be able to deliver to their customers greater visibility into the effects of noise, timing, and power at each phase of the design cycle.

Cadence is trading at $10.05 with a market capitalization of $2.74 billion. It touched a 52-week high of $11.72 in November 2011.

Mentor’s Financials
Mentor’s (Nasdaq:MENT) Q3 revenues grew 5% over the year to $250.5 million, above market expectations of $244.9 million. EPS of $0.25 was also ahead of the Street’s target of $0.21. Bookings for the quarter increased more than 20% over the year. During the quarter, they repurchased $10 million of stock at an average price of $10.79.

For the current quarter, Mentor expects revenues of $316 million with EPS of $0.50. The market was expecting revenues of $315.9 million with EPS of $0.53. They expect to end the year with revenues of $1.01 billion with EPS of $1.05.

Mentor’s Tie ups
During the quarter, Mentor continued to extend their partnerships and recently tied up with Freescale Semiconductor to deliver an advanced embedded systems software suite for automobile infotainment with a GENIVI compliant product. Another tie-up with ARM helped them launch a manufacturing test solution for ARM processor-based designs. They also announced a partnership with NuFlare Technology on advanced IC mask generation.

Mentor’s stock is trading at $13.12 with a market capitalization of $1.44 billion. It touched a 52-week high of $16.56 in February 2011.

At long last, consolidation has dropped the number of major contestants in EDA to three. The industry doesn’t see much growth, so these three will carry on for a while now in their game of musical chairs. Much of the semiconductor industry, including the infrastructure players like EDA and equipment, faces tremendous margin pressure, trending toward becoming nonprofit businesses. This is a sorry state because the industry remains crucial to all the innovation that the downstream players are dependent on.